For the entire year, builders started just 606,900
homes. That's only slightly better than the previous two years. And it's
roughly half the 1.2 million that economists equate with healthy
housing markets.

Single-family home construction rose in December
for a third straight month. Still, builders started just 428,600
single-family homes all year, the fewest on records dating back a
half-century. In a good economy, builders break ground on twice as many.

Single-family homes are critical to a housing rebound because they account for roughly 70 percent of the market.

Analysts said the final months point to improvement.

"We
expect further sustained gains in starts and permits over the next few
months; a real recovery is getting started," said Ian Shepherdson, chief
U.S. economist at High Frequency Economics.

Most analysts say it
will be years before the industry is fully recovered. And it could be
bumpy, as last month's apartment data showed.

Sales
of new homes last year are likely to be the worst on records dating
back half a century. Record-low mortgage rates and plunging home prices
have done little to lift the market.

Builders are struggling to
compete with deeply discounted foreclosures and short sales — when
lenders allow homes to be sold for less than what's owed on the
mortgage.

Though new homes represent just 20 percent of the
overall home market, they have an outsize impact on the economy. Each
home built creates an average of three jobs for a year and generates
about $90,000 in taxes, according to the National Association of Home
Builders.

After previous recessions, housing accounted for at
least 15 percent of U.S. economic growth. Since the recession officially
ended in June 2009, it has contributed just 4 percent.

Another
reason sales have fallen is that previously occupied homes have become a
better deal than new homes. The median price of a new home is about 30
percent higher than the median price for a re-sale. That's nearly twice
the markup typical in a healthy housing market.

The homebuilders'
trade group said Wednesday that its survey of industry sentiment rose in
January to 25, the highest level since June 2007. Still, any reading
below 50 indicates negative sentiment about the housing market. The
index hasn't reached 50 since April 2006, the peak of the housing boom.